The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s forward-looking cargo order data point towards lower Chinese steel exports in the short to medium term. While this development weighs on global aggregate levels, other major steel producers also face weaker demand for seaborne exports. The turn of events could signal further headwinds for iron ore and global manufacturing activities.
Demand for Seaborne Transportation of Chinese Steel Exports Under Pressure
The Chinese steel rebar futures have staged a significant recovery over the past month, but last week saw a reversal of recent good fortunes amid a decline of nearly four per cent. Still, the November contracts listed on the Shanghai Futures Exchange ended last week at around ten per cent higher than in early September. This development followed an extended period of headwinds, with the futures shedding more than twenty per cent between the end of May and early September. While hopes that more stimulus for the Chinese economy will improve the demand situation have contributed to higher prices, a seasonal recovery for steel buying is also likely to have supported prices in recent weeks.
Cargo order volumes for steel exports loading in Chinese ports have declined significantly in recent weeks. While lingering effects from the Golden Week may have contributed to the weakness, recent depressed volumes may also signal rising domestic demand for steel. Despite some weekly spikes, demand for seaborne transportation of steel exports from Chinese ports has been trending lower since the beginning of the third quarter.
The cargo order volumes recorded during the past three weeks are around half of the weekly average for the year’s first nine months. Hence, Chinese steel exports are on course for a weak October, which will weigh on the month’s official trade statistics when released next month. While it might be a bad omen for the smaller dry bulk segments and Chinese export data, it might indicate that imports will move higher.
The Decline in Global Steel Exports Is More Than Just China
The decline in demand for seaborne transportation of steel from China has contributed to a significant drop in global cargo order volumes for the metal since the beginning of October. However, not only soft demand for shipments from China has weighed on the global aggregate. Other major exporters, such as India and Brazil, have registered a reduction in demand for seaborne transportation.
Compared to a year ago, last month's global aggregate cargo order volumes for steel were 6.0 per cent lower. While the first week of the month showed some limited promise, with volumes for India and Brazil increasing, the totals for the past two weeks were among the lowest demand levels recorded this year. Hence, with less than half of October remaining, current order volumes suggest that the month could see a year-on-year decline of around 25 per cent. This development could add to the headwinds that iron ore is currently facing.
Weaker Global Steel Imports Could Signal Lower Economic Growth
While higher domestic Chinese demand could weigh on global cargo order volumes, some major importers are nevertheless signalling lower demand, possibly due to economic headwinds.
In the US, demand for seaborne imports of steel pointed towards a seasonal recovery over the past two months. However, in recent weeks, volumes have been coming off sharply. Across the Atlantic, European demand remains reasonably stable, but weekly cargo order volumes are below their long-term average. In the Far East and South East Asia, demand for seaborne imports of steel is seeing a seasonal rebound, but volumes are lower than during the same period last year. Other notable developments are weaker order volumes for cargoes due for discharge in Egypt and the Arabian Gulf.
Given steel's central role in manufacturing and construction, the current weak demand for seaborne imports suggests that economic headwinds are building up. As highlighted in the previous section, global aggregate demand during September fell short of the levels recorded last year, and the current month is on course for a significant year-on-year drop. The development suggests that not only China is facing economic headwinds, with global growth more broadly facing downward pressure.
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